Today Statement: USD/JPY Heading to 100 after Confirming Double Bottom Reversal

USD/JPY surges through 96 level in early US session on the back of renewed strength in dollar and persistent selling in the Japanese yen. US stocks open higher today but remains soft in general. Conference board consumer confidence dropped to new record low of 25 in Feb, much worse than expectation of 35.5. S&P/Case Shiller 20 composite house prices also dropped more than expected by -18.5% yoy in Dec. In his semi annual testimony to Congress, Fed Bernanke said that the US economy is suffering through a "severe contraction" and is likely shrinking through first half of this year but hope that recession will end with the year. Significant stresses persist in financial markets and institutions remain under pressure. Also downside risks outweigh those on the upside.

Risk aversion remains the general theme in the markets throughout the day. Investors remain nervous as Germany, Belgium and Finland CDS spread touch record high. European stocks are broadly lower with major indices in negative territory. Markets are also concerned by news that AIG, which was bailed out last year already, may restructure its %150b rescue package for the second time in four months as the company may report record Q4 loss of $60b next week. Swissy benefits from safe haven buying and strengthens across the board. Sterling remains was supported by better than expected CBI reports but gives way on risk aversion.

On the technical side, USD/JPY's strong break of 94.61 argues that a medium term bottom is in place with a double bottom reversal pattern at 87.13 and 87.12. The pair should set to test 100 psychological level next. Dollar index's rise from 85.64 resumes after brief retreat and should extend further towards 88.24 as long as 86.82 minor support holds. Though, we're still favoring at least on more fall to 85.64 and below, probably to test 83.57 before the dollar index finishes consolidation that started at 88.24.

Based on ActionForex.com Technical Outlook